EU Council president moots €5bn ‘Brexit reserve’

10 Jul 20

A €5bn ‘Brexit reserve’ has been proposed by the European Council to deal with disruption caused to other members states when the UK’s transition phase ends in 2021.



European Council president Charles Michel made the proposal while laying out his suggestions for a compromise on the EU’s next multi-year budget framework and Covid-19 recovery plan.

“Brexit is challenging for all of us and that is why we propose a Brexit reserve,” he said.

“We would create this reserve in order to counter the unforeseen consequences in the most-affected member states and sectors.”

The proposal comes just one day after EU chief Brexit negotiator Michel Barnier revealed that “significant divergences remain” between Brussels and the UK in talks about their future relationship.

Negotiations have stalled on issues such as state aid rules and fisheries policy, with the EU generally wanting far greater alignment with EU standards and policies than the UK wishes to keep.

Michel’s announcement also outlined the Council’s proposals for EU spending post-pandemic, ahead of a meeting between all 27 member-state leaders next week – the first in-person meeting since the beginning of the crisis in Europe.

He outlined a compromise deal for the agreement, following “strong opposition” to initial proposals, particularly from fiscally conservative northern European countries including Sweden and the Netherlands.

The next long-term budget, known as the Multiannual Financial Framework, would be €1.074trn for the period of 2021-27, and a €750bn recovery fund for economies hit by Covid-19, with two-thirds in grants and the rest in repayable loans.

The budget is slightly (approximately €26m) smaller than initially proposed by the European Commission, but the recovery fund remains largely unchanged.

Its size and grant-to-loan ratio is the same as previously suggested, but it might now come with conditions such as country-specific commitments in areas such as governance and rule of law, he said, adding that 30% should be targeted at climate-related projects.

Following discussions with politicians, Michel also suggested rebates – country contributions to the EU that are partially paid back if they received less than they paid in from the budget – would remain for Denmark, Germany, the Netherlands, Austria and Sweden.

It had been the Commission’s ambition to end the rebate system after Brexit.

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